Brief Update On The State Cannabis in New York: A Waiting Game

By: Andrew P. Cooper, Esq., LL.M. and Terran Cooper

The state of cannabis in New York remains in a state of flux. We had previously discussed the completion of the Cannabis Control Board (CCB) under Governor Kathy Hochul at the end of September. This came six months after the passage of the Marijuana Regulation and Taxation Act (MRTA), which made recreational cannabis legal in New York. Since that time, the CCB has held three meetings to further guide the operations of the Office of Cannabis Management (OCM). Despite hitting the ground running, and to the disappointment of many, it now seems the adult-use cannabis market won’t launch until at least 2023.

Timeline for Adult-Use Launch in New York

During a recent Rochester cannabis symposium, CCB Chair Tremaine Wright spoke about her anticipation of the first adult-use cannabis licensing. Wright stated that she does not anticipate cannabis facilities to have the legal authority to operate until the spring of 2023. Wright further stated that this doesn’t mean that dispensaries will be open at that time, but that the legal framework to do so will be in place in 2023. The MRTA had established April 1st, 2022, as the earliest potential start date for adult-use sales, but it seems sales may not start until at least a year afterwards. This comes to the dismay of the many New Yorkers waiting for an adult-use market, and entrepreneurs looking to build cannabis businesses. With sales likely not coming until 2023, it is uncertain what landscape the New York adult-use market will launch under. Federal legislation such as the SAFE Banking Act could significantly impact the state of cannabis nationwide over the next year and a half. Operators seeking New York licensure will want to keep up with any potential federal changes as well as ensure they remain prepared for further guidance issued by the State.

First CCB Meeting

In the October 5th meeting, the CCB began with an introduction of the CCB members and resolutions permitting their service on the CCB. An additional resolution to commence the transfer of certain functions and employees from the Department of Health to the OCM was also passed. In their first meeting, the CCB enhanced the current Medical Cannabis Program, notably allowing whole flower to be an approved medical cannabis product. Additionally, the CCB increased the amount of cannabis product that may be dispensed to medical patients from a 30 day to 60 day supply and permanently waived the registration fee.

Second CCB Meeting

In the October 21st meeting, the CCB addressed the gifting and unlicensed sale of cannabis in New York. CCB Chair Tremaine Wright stated, “while gifting or transferring cannabis under the possession limit between adults who are 21 years or older without any money paid or services provided is legal, gifting does not include instances in which cannabis is given away at the same time as another transaction nor when it is offered or advertised in conjunction with an offer for the sale of goods or services.” Wright went on to say those who are involved in the illegal sale of cannabis run the risk of “severe financial penalties.” The details of any potential prosecution are unknown but could be significant for the many illicit cannabis operations in New York. Similar “gifting” schemes have arisen in a number of decriminalized and legal jurisdictions such as Washington D.C. Law enforcement in New York has been reluctant to intervene in these grey areas, but may now choose to do so with the support of the CCB.

Chris Alexander, the executive director of the CCB, discussed the current state of expungements under the MRTA. Under the 2019 New York State cannabis decriminalization law and MRTA the expungement of cannabis convictions is automatic. Relevant agencies have a two-year period in which to comply. Since the 2019 legislation, there have been 198,000 record expungements. Alexander also announced that 203,000 cannabis-related charges are currently being suppressed from criminal background searches and are in the process of expungement. Upon completion, over 400,000 records will have been expunged in New York alone, a grave reminder of the effect of the War on Drugs in New York and beyond.

Additionally, the CCB filed proposed regulations with the Department of State to permit the home cultivation of cannabis by certified patients and caregivers. This kicks off the 60-day public comment period, with the regulations to be adjusted and finalized following the period. The proposed regulations limit the number of plants to be grown by a patient, as well as other requirements to doing so.

Lastly, Chris Alexander reiterated the municipal opt-out process provided by the MRTA. Local law opting out of adult-use cannabis retail dispensaries and/or on-site consumption businesses must be done prior to December 31st, 2021 (despite the fact that there apparently now won’t be a recreational market until at least 2023). Municipalities that choose to opt out will not receive any local excised tax revenue and can choose to opt back in at any point in the future. Unlike the New Jersey opt-out, New York municipalities are prohibited from opting out of license types other than retail dispensaries and on-site consumption licenses.

Third CCB Meeting

In their most recent November 3rd meeting, the CCB passed Resolution No. 2021-07 allowing for adoption of the new Cannabinoid Hemp Regulations. The regulatory standards require products to be manufactured according to Good Manufacturing Practices (GMP) specific to the product form. Notably, along with the adoption of these regulations, comes the availability for the production of food and beverages containing CBD for human consumption. The CCB additionally implemented further laboratory, packaging, and labeling standards as further shown below. The CCB also established future edits to be implemented in the Cannabinoid Hemp Regulations including; raising the per serving milligram cap for cannabinoid dietary supplements, removing the shelf stability requirement, raising acceptable THC levels in intermediary hemp extract, defining “craft” cannabis, establishing a process for small hemp farmers to process and manufacture their own product, and a number of others. The production of hemp flower products will also now be allowed on the condition they are not intended for smoking (this means products such as pre-rolls are not allowed).

Another notable consequence of this most recent CCB meeting is the current illegality of products containing Delta-8 THC. Delta-8 has operated in a legal grey area over the last couple of years and has gained significant popularity due to its intoxicating effects, especially in areas with no access to adult-use THC-rich cannabis. The CCB has now announced the illegality of Delta-8 products, opting to regulate them in the future.

The CCB also passed resolution on the staffing recommendations of the Executive Director, which should allow for a smoother and quicker rollout of new regulations. Chris Alexander also reported on the recent cannabis labor guidance, medical cannabis home cultivation, municipal opt-outs, and a new public health and safety campaign.

Overview of Cannabinoid Hemp Regulatory Standards

Manufacturing Standards

• Products must be manufactured using Good Manufacturing Practices (GMP) specific to the product form (e.g., food or dietary supplement)

Laboratory Standards

• Labs must be ISO/IEC 17025 accredited or approved to test medical marijuana in NYS
• Full panel of testing required including cannabinoid profile, heavy metals, microbials, pesticides, mycotoxins, and residual solvents

Packaging and Labeling Standards

• Nutritional or supplement fact panel
• Total cannabinoids per product/serving, stating the amount of CBD and THC, if applicable
• QR code or link to Certificate of Analysis
• Product warnings (e.g., Not evaluated by FDA)
• Mechanism to report an adverse event
• List of all ingredients
• Expiration or Best Buy date
• Country where hemp is sourced

Due to delays in adopting the regulations, the effective date for many provisions has been extended by six months as intended when the regulations were initially proposed for public comment, corresponding to April 2022.

Future Edits to the Cannabinoid Hemp Regulations

• Change the per serving milligram (mg) cap for dietary supplement cannabinoid hemp products from 75 mg to 100 mg
• Remove the requirement that cannabinoid hemp products be shelf-stable
• Increase the acceptable THC concentration of intermediary hemp extract from 3% THC to 5% THC
• Allow out-of-state manufacturers to omit the label warning that the product may cause a consumer to fail a drug test
• Establish a process for small Hemp farmers to affordably process and manufacture their own product (similar to a microbusiness)
• Move the cannabinoid hemp testing limits from regulation to a guidance document
• Modify the requirement to list the milligrams (mg) of Total THC per serving and per package on cannabinoid hemp product labeling
• Require cannabinoid hemp processors to include on the label the state(s) where the hemp used to manufacture the product was sourced from
• Define “craft” cannabis to prohibit advertising and marketing from processors who do not meet the definition

Review the full proposed regulations here: https://regs.health.ny.gov/sites/default/files/proposed-regulations/Cannabinoid%20Hemp_0.pdf

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.